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Personal Loans

Solar Loans: Lenders Offering Solar Panel Financing

Updated May 30, 2023   |   15 mins read

Want to use renewable energy to lower your electricity bill? Solar panels can offer several long-term benefits to homeowners, such as lower energy bills, increased property values, and positive environmental impact. However, solar panels often require a significant upfront investment that can cost $14,000 to $40,000. 

Financing solar panels through an unsecured personal loan can be an attractive option. You can use these loans for any purpose and pay in installments without putting your property at risk.

You also have the option to take out a home improvement loan, which is a personal loan specific to home improvement projects. You may have several options when it comes to loans for solar panels, and we’ve weighed the pros and cons of every option to help you make your financing decision.

In this guide:

Best lenders for solar panel loans

We looked at lenders offering solar panel loans and selected them based on the credit profiles they target. We’ll cover our selections for the best solar panel loans for excellent, good, fair, and little to no credit. 

The three credit bureaus—Equifax, TransUnion, and Experian—put credit scores in categories that indicate your ability to qualify for a loan. This score often influences your loan terms. Credit score categories will vary depending on whether you use the FICO or VantageScore ranges. 

The table below shows FICO credit score categories. 

Credit scoreCategory
300 – 579Poor
580 – 669Fair
670 – 739Good
740 – 799Very good
800 – 850Excellent

To find your credit score for free, visit websites such as Credit Karma and Credit Sesame. This only requires a soft credit check, which won’t hurt your credit score.

Click the link below to jump to our review of each lender.

Best for excellent credit: LightStream

Editorial rating: 4.8 out of 5

  • Rate Beat program: Will beat competitors’ rates by 0.10 percentage points
  • No fees
  • Fast funding: Get funds as soon as the same business day

LightStream offers solar financing for homeowners with good to excellent credit. It provides a home improvement loan, so you can use the funds to pay for other projects along with your solar panels. LightStream’s solar loan doesn’t require a certain amount of home equity or an appraisal. 

The solar loan also has an autopay option with a 0.50% interest rate discount. It charges no origination fees, late fees, or prepayment penalties, so you can pay off your loan early.

  • Credit score category: Excellent, good (660+)
  • Soft credit pull to check rates? Yes
  • Deposit time: Same day
  • Origination fee: None
  • Late fee: None
  • Rates (APR): 8.99%22.74% with autopay
  • Repayment terms: 36 – 84 months
  • Loan amounts: $5,000 – $100,000

Best for good credit: SoFi

Editorial rating: 5 out of 5

  • No fees required
  • Flexible terms
  • Unemployment Protection program for borrowers who lose their jobs

SoFi offers unsecured home improvement loans, which you can use to finance solar panels. It’s fast and convenient—you don’t need to use your home as collateral or get an appraisal. You can receive get loan funding as soon as the same day you apply. 

The lender assesses a 0% to 6% loan origination fee. However, to save money, you can take advantage of the 0.25% autopay interest rate discount and a 0.25% direct deposit rate discount. You’re eligible for the latter if you direct deposit at least $1,000 each month into a SoFi checking, savings, or Money account.

  • Credit score category: Excellent, good
  • Soft credit pull to check rates? Yes
  • Deposit time: Same day
  • Origination fee: 0% – 6%
  • Late fee: None
  • Rates (APR):  8.99% – 23.43% with autopay
  • Repayment terms: 24 – 84 months
  • Loan amounts: $5,000 – $100,000

Best for fair credit: Upgrade

Editorial rating: 4.9 out of 5

  • Credit health tools (free credit monitoring, credit score tracking, and personalized insights)
  • Lower credit score requirements than many lenders
  •  Offers job loss protection and hardship programs

Upgrade offers personal loans for home improvement purposes, which also covers the purchase and installation of solar panels. Borrowers with fair to bad credit can be eligible, but the interest rates may be higher.

Similar to other lenders, Upgrade’s approval process is fast and straightforward. Funds are generally available as soon as the next business day after approval. The company doesn’t charge prepayment penalties, allowing borrowers to pay off the loan early and save on interest payments.

  • Credit score category: Fair, bad (560+)
  • Soft credit pull to check rates? Yes
  • Deposit time: As soon as the next business day
  • Origination fee: 1.85% – 9.99%
  • Late fee: $10
  • Rates (APR): 8.49%35.97%
  • Repayment terms: 24 – 84 months
  • Loan amounts: $1,000 – $50,000

Best for thin credit: Upstart

Editorial rating: 4.8 out of 5

  • Minimum credit score is 300 (the lowest possible)
  • Uses an AI-driven lending model to evaluate creditworthiness and offer personalized loan terms
  • Generous 0.50% autopay discount

For borrowers with little to no credit history, Upstart’s home improvement loan could be a solid option to finance your solar panel installation. You can use the loan proceeds for other renovations or home repairs too. This is an unsecured loan that doesn’t use your home as collateral.

Its origination and late fees are much higher than other lenders, but Upstart allows a 15-day grace period for payments before charging a late fee. You can pay off your loan in advance without incurring prepayment penalties.

  • Credit score category: Bad or no credit
  • Soft credit pull to check rates? Yes
  • Deposit time: As soon as the next business day
  • Origination fee: 0% – 10%
  • Late fee: $15 or 5% of the payment (whichever is higher) 
  • Rates (APR): 6.12% – 35.99%
  • Repayment terms: 36 – 60 months
  • Loan amounts: $1,000 – $50,000

How to get a solar panel loan

Getting a solar loan is similar to applying for personal loans. Here are the steps you should take:

1.  Shop around

Compare lenders to find the one that offers the best terms for your needs. Consider the following factors to help make your decision:

  • Interest rates: Compare each loan’s annual percentage rate (APR). Lower solar loan rates mean lower monthly payments, but they also tend to have stricter eligibility requirements.
  • Loan amounts: Different lenders offer unique maximum loan amounts. When it comes to loans for solar systems, the amount you can apply and qualify for will depend on the estimated cost of the system, your credit score, and other factors.
  • Loan repayment terms: The repayment term is the time it takes to repay the loan. Longer terms result in lower monthly payments, but they also come with higher interest costs.
  • Fees: Be sure to check for any costs associated with the loan, such as origination fees, late payment fees, and prepayment penalties. These fees can add hundreds or thousands of dollars to your loan.
  • Discounts: Some lenders offer interest rate discounts such as autopay discounts or reduced rates to set up qualifying direct deposits. 
  • Requirements: Some loans require collateral, home equity percentages, or appraisals. These can be time-consuming and difficult to qualify for, depending on your situation.

2. Prepare your documents

Once you’ve chosen a lender, ensure you have all the necessary documents to apply for the loan. This often includes:

  • Proof of income: Pay stubs or tax returns
  • Proof of identification: Driver’s license or passport
  • Proof of address: Utility bills or bank statements
  • Bank statements: These allow the lender to check your financial situation

For solar loans, you may also need to provide documents related to the solar panel installation, such as price quotes and contractor details.

3. Check your rates

You can prequalify for a loan to get an idea of what rates you may be offered. This requires a soft credit check, which won’t decrease your credit score.

To prequalify, you only need to provide basic information, such as your name, address, and income. The lender will use this to determine whether you’re eligible and what loan terms you qualify for. However, prequalification does not guarantee you’ll get the loan, and failing to prequalify does not mean you won’t be able to get the loan once you apply.

4. Apply for the loan

You can apply for most loans online quickly. Processing your application could take a day to a week, and you may need to provide additional documents at this stage. The lender should notify you within a few days whether your application has been approved.

Once you are approved, your funds will be available within a few business days. Lenders that charge origination fees will often subtract the fees from the loan amount it disburses to you.

Alternatives to personal loans for solar panels

If personal loans don’t seem the right option, consider the following financing methods.

Government loans for solar panels

Energy Efficient Mortgage Program (EEM)

In the United States, the Federal Housing Administration (FHA) offers an Energy Efficient Mortgage Program (EEM), allowing borrowers to finance energy-efficient home improvements, such as solar panels. You can add this “energy package” to your FHA loan amount. 

Borrowers must meet specific eligibility requirements, and the loan amount is based on the expected energy savings of the improvements as identified by a qualifying home energy assessment. Loan amounts can also be calculated based on a percentage of house prices in the area or other value calculations. 

Veterans Cash-Out Refinance Loan

The Department of Veteran Affairs (VA) offers a Cash-Out Refinance Loan. This loan allows veterans to refinance their VA mortgage and borrow a certain percentage of the home’s value for personal or home improvement needs, such as energy-efficiency upgrades.

Additional government resources

Aside from the two we mentioned above, other types of government loans are available for solar panels, depending on the state in which you live. The U.S. Office of Energy Efficiency and Renewable Energy has a comprehensive list of energy-related federal financial assistance programs.

Home equity-based solar loans for homeowners

Homeowners with sufficient home equity can take advantage of a home equity loan or line of credit (HELOC) to finance their solar panel installation. Home equity is your home’s value minus what you still owe on your mortgage. 

Both types of loans allow you to borrow against the equity in your home, and they often come with lower interest rates than personal or home improvement loan options. 

  • A home equity loan provides you with a lump sum you must repay over a certain period.
  • A HELOC works like a credit card and allows you to borrow up to a specific limit over a set period as you need it. Interest only accrues on the amount you borrow as you borrow it rather than on a large lump sum from the date of disbursement. You can withdraw funds from the line of credit during the draw period. In the repayment period, you must pay off any outstanding balance.

We’ve summarized the differences between a home equity loan and HELOC below:

Home equity loan HELOC
Interest rateFixed rateVariable- and fixed-rate options
Type of loanSecured with your home as collateralSecured with your home as collateral
Access to fundsLump sumLine of credit as needed
RepaymentFixed monthly paymentsPay interest only during the draw period, then payments on funds borrowed and interest during the repayment period

Solar panel leasing

Leasing may be a favorable option for those who don’t have the cash or credit to purchase solar panels. With a lease, you don’t need to pay upfront because you don’t own the solar panel system. Instead, you pay a monthly fee for a specific period, and the company that owns the panels is responsible for all repairs and maintenance.

Solar panel leasing often requires a long-term commitment—usually 20 to 25 years (the average “life” of a well-maintained solar panel). You’re also ineligible for any available tax credits or rebates that come with owning a solar panel system because you’re not the owner.

Power purchase agreements (PPAs)

Power purchase agreements (PPAs) are a type of agreement between a homeowner and a solar energy provider in which the solar company installs, owns, and maintains the system. The homeowner then agrees to purchase the electricity the system produces at a predetermined rate.

This is similar to a solar panel lease, but the payment terms differ. With a PPA, you don’t pay a fixed monthly fee. Instead, you purchase the electricity generated at a lower rate than your current utility charges.

In-house financing from solar companies

Some solar energy companies offer in-house financing for their products. This may be a solid option for those with limited credit because in-house financing is often designed to make buying solar panels more accessible. 

However, solar companies that offer in-house financing may require you to purchase a specific model. They might also charge higher interest rates than other financing options. Examples of solar companies that offer in-house financing are SunPower, Blue Raven Solar, and ADT Solar.

Cash payments

If you have the funds, a cash payment is the most economical way to purchase solar panels. You’re not subject to interest payments or credit checks, and you may qualify for additional incentives, such as federal solar tax credits.

Keep in mind you may need to pay cash for additional equipment, installation, and maintenance, so be sure to factor that into your budget.

Solar panel costs and savings

Solar panel system and installation costs can be pricey, ranging from $14,000 to $40,000. It takes an average of eight to nine years to break even when it comes to energy savings versus initial installation costs. A high-interest loan or a longer loan term can increase the time it takes to break even.

What is the average cost to install solar panels?

According to Consumer Affairs, a 6-kW solar panel system costs between $16,870 and $23,170 (after federal solar tax credits). Installation costs can vary from $14,000 for a small solar panel system to at least $40,000 for more complex and higher-tiered systems.

How can a borrower calculate how long it will take to benefit from the savings solar panels offer?

How long it will take to benefit from your solar panel electricity savings is called the solar payback period. This refers to the amount of time it takes to break even on your investment.

  • To calculate the solar payback period: Subtract the tax incentives or rebates from the total amount of installation. This is the total cost of your investment. Then, divide the total investment cost by your monthly electricity cost savings. This is the solar payback period in months.
  • To calculate the monthly electricity/utility cost savings: Multiply the kilowatt per hour (kWh) of electricity you used from your solar panels by the utility’s billing rate per kWh. Note: You’ll still get an electric bill with solar panels installed, and you will need to subtract these fees from your cost savings. You can expect to be billed for mandatory utility fees, such as transmission and distribution fees. 

On average, it takes between eight and nine years to recover the initial cost of solar. However, this can vary depending on individual circumstances, such as location and energy use.

How does interest affect the potential savings and time it takes to break even?

The longer you take to pay off the loan, the more interest you will pay. If you take several years to repay the loan, it will take longer for the solar panels to reach their breakeven point. If you have a high interest rate due to poor credit, your loan will accrue more interest and take longer to pay off and break even. 

FAQ

What are the best solar loan rates?

Solar loan rates can vary from 6% to 36% (as of April 2023), depending on your credit and the type of loan you choose. To determine the best solar loan rates, get prequalified for various loans and compare the annual percentage rates (APRs).

Home equity lines of credit (HELOCs) and home equity loans may offer the lowest rates, but they require you to use your house as collateral. Personal and home improvement loans may have higher rates but do not have home equity or collateral requirements.

Can you get government loans for solar panels?

Yes, the Federal Housing Administration (FHA)’s Energy Efficient Mortgage Program (EEM) allows homeowners to get a loan to install solar panels. The Department of Veteran Affairs (VA) has a Cash-Out Refinance Loan that can be expanded to cover the cost of solar panels.

Some states also offer financing programs for solar installation. Check with your state government to see what options are available.

Are there special solar loans for homeowners?

You can get a solar loan through a home equity loan or (HELOC). Because installing solar panels is considered a substantial home improvement, you may be able to deduct the interest you paid on your loan from your taxes. 

Does it make sense to finance solar panels?

A solar loan may make financial sense for a borrower if the savings from using solar power outweigh the costs associated with financing. It’s essential to consider several factors, such as:

  • Electricity rates
  • Available solar incentives (i.e., tax benefits and rebates)
  • Financing terms and rates
  • Amount of energy the system produces 
  • Solar payback period

It’s also important to consider the long-term potential of solar. Electricity rates may rise, so a solar investment now could lead to more significant savings later.